MetLife 2007 Annual Report Download - page 48

and 2006, the Company had outstanding $4.5 billion and $3.8 billion, respectively, in junior subordinated debt and $159 million and
$278 million, respectively, in shares subject to mandatory redemption.
Debt Issuances. In December 2007, MetLife Capital Trust IV (“Trust IV”), a variable interest entity (“VIE”) consolidated by the Company,
issued exchangeable surplus trust securities (the “Trust Securities”) with a face amount of $700 million and a discount of $6 million
($694 million). The Trust Securities will be exchanged into a like amount of Holding Company junior subordinated debentures on
December 15, 2037, the scheduled redemption date; mandatorily under certain circumstances; and at any time upon the Holding
Company exercising its option to redeem the securities. The Trust Securities will be exchanged for junior subordinated debentures prior to
repayment. The final maturity of the debentures is December 15, 2067. The Holding Company may cause the redemption of the
Trust Securities or debentures (i) in whole or in part, at any time on or after December 15, 2032 at their principal amount plus accrued and
unpaid interest to the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to December 15, 2032 at their principal
amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price. Interest on the Trust Securities or
debentures is payable semi-annually at a fixed rate of 7.875% up to, but not including, December 15, 2037, the scheduled redemption
date. In the event the Trust Securities or debentures are not redeemed on or before the scheduled redemption date, interest will accrue at
an annual rate of 3-month LIBOR plus a margin equal to 3.96%, payable quarterly in arrears. The Holding Company has the right to, and in
certain circumstances the requirement to, defer interest payments on the Trust Securities or debentures for a period up to ten years.
Interest compounds during such periods of deferral. If interest is deferred for more than five consecutive years, the Holding Company may
be required to use proceeds from the sale of its common stock or warrants on common stock to satisfy its obligation. In connection with the
issuance of the Trust Securities, the Holding Company entered into a replacement capital covenant (“RCC”). As a part of the RCC, the
Holding Company agreed that it will not repay, redeem, or purchase the debentures on or before December 15, 2057, unless, subject to
certain limitations, it has received proceeds from the sale of specified capital securities. The RCC will terminate upon the occurrence of
certain events, including an acceleration of the debentures due to the occurrence of an event of default. The RCC is not intended for the
benefit of holders of the debentures and may not be enforced by them. The RCC is for the benefit of holders of one or more other
designated series of its indebtedness (which will initially be its 5.70% senior notes due June 15, 2035). The Holding Company also entered
into a replacement capital obligation which will commence in 2037 and under which the Holding Company must use reasonable
commercial efforts to raise replacement capital through the issuance of certain qualifying capital securities.
In December 2007, MLIC reinsured a portion of its closed block liabilities to MetLife Reinsurance Company of Charleston (“MRC”), a
wholly-owned subsidiary of the Company. In connection with this transaction, MRC issued, to investors placed by an unaffiliated financial
institution, $2.5 billion of 35-year surplus notes to provide statutory reserve support for the assumed closed block liabilities. Interest on the
surplus notes accrues at an annual rate of 3-month LIBOR plus 55 basis points, payable quarterly. The ability of MRC to make interest and
principal payments on the surplus notes is contingent upon South Carolina regulatory approval. Simultaneous with issuing the surplus
notes, the Holding Company entered into an agreement with the unaffiliated financial institution, under which the Holding Company is
entitled to the interest paid by MRC on the surplus notes of 3-month LIBOR plus 55 basis points in exchange for the payment of 3-month
LIBOR plus 112 basis points, payable quarterly. Under this agreement, the Holding Company may also be required to make payments to
the unaffiliated financial institution related to any decline in the market value of the surplus notes and in connection with any early
termination of this agreement. A majority of the proceeds from the offering of the surplus notes were placed in trust to support MRC’s
statutory obligations associated with the assumed closed block liabilities. The trust is a VIE which is consolidated by the Company. At
December 31, 2007, the Company held assets in trust of $1.9 billion associated with the transaction.
In May 2007, the Holding Company and MetLife Reinsurance Company of South Carolina (“MRSC”), a wholly-owned subsidiary of the
Company, entered into a 30-year collateral financing arrangement with an unaffiliated financial institution that provides up to $3.5 billion of
statutory reserve support for MRSC associated with reinsurance obligations under intercompany reinsurance agreements. Such statutory
reserves are associated with universal life secondary guarantees and are required under U.S. Valuation of Life Policies Model Regulation
(commonly referred to as Regulation A-XXX). At December 31, 2007, $2.4 billion had been drawn upon under the collateral financing
arrangement. The collateral financing arrangement may be extended by agreement of the Holding Company and the unaffiliated financial
institution on each anniversary of the closing. Proceeds from the collateral financing arrangement were placed in trust to support MRSC’s
statutory obligations associated with the reinsurance of secondary guarantees. The trust is a VIE which is consolidated by the Company.
The unaffiliated financial institution is entitled to the return on the investment portfolio held by the trust. Simultaneous with entering into the
collateral financing arrangement, the Holding Company entered into an agreement with the same unaffiliated financial institution under
which the Holding Company is entitled to the return on the investment portfolio held by the trust established in connection with this
collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial institution of 3-month
LIBOR plus 70 basis points, payable quarterly. The Holding Company may also be required to make payments to the unaffiliated financial
institution, for deposit into the trust, related to any decline in the market value of the assets held by the trust, as well as amounts
outstanding upon maturity or early termination of the collateral financing arrangement. At December 31, 2007, the Company held assets in
trust of $2.3 billion associated with this transaction.
In March 2007, RGA issued $300 million of 10-year senior notes with a fixed rate of 5.625%, payable semiannually. RGA used
$50 million of the net proceeds of the offering to repay existing debt during the year ended December 31, 2007.
In December 2006, the Holding Company issued junior subordinated debentures with a face amount of $1.25 billion. The debentures
are scheduled for redemption on December 15, 2036; the final maturity of the debentures is December 15, 2066. The Holding Company
may redeem the debentures (i) in whole or in part, at any time on or after December 15, 2031 at their principal amount plus accrued and
unpaid interest to the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to December 15, 2031 at their principal
amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price. Interest is payable semi-annually at a
fixed rate of 6.40% up to, but not including, December 15, 2036, the scheduled redemption date. In the event the debentures are not
redeemed on or before the scheduled redemption date, interest will accrue at an annual rate of 3-month LIBOR plus a margin equal to
2.205%, payable quarterly in arrears. The Holding Company has the right to, and in certain circumstances the requirement to, defer interest
payments on the debentures for a period up to ten years. Interest compounds during such periods of deferral. If interest is deferred for
more than five consecutive years, the Holding Company may be required to use proceeds from the sale of its common stock or warrants on
common stock to satisfy its obligation. In connection with the issuance of the debentures, the Holding Company entered into a RCC. As
44 MetLife, Inc.